US SFR market remains strong for foreign investors

The U.S. economy rebounded at the end of last year. Improved employment, better wages and low gas prices kickstarted consumer demand and boosted the dollar’s value.This increases the relative price of U.S. homes for investors who hold foreign currency, and many believe this will curb the recent trend toward foreign investment in U.S. real estate. While costs may be higher for these investors, the U.S. still offers numerous benefits for investors from abroad who want to diversify their portfolios with single-family rentals.

Transparency provides confidence

Relatively high levels of transparency on government economic policy and consistent property laws make the U.S. a compelling alternative for foreign nationals who are wary of investing in their home markets. Government corruption is widespread in some foreign countries, and this can make property investments a dicey proposition. This can be seen in the actions of Chinese real estate investors.

Chinese investors have become a massive force in the U.S. housing market. The National Association of Realtors measured $92.2 billion in home sales to international buyers last year. The biggest contribution to that total came from Chinese investors, who accounted for 22 percent of sales. It’s likely that many of these buyers are hoping to avoid widespread governmental corruption that can invalidate property investments in their home country. The history of governmental land seizure in China is well-documented, and until 2012, The Wall Street Journal reported it was possible for local officials to requisition land without paying compensation to current owners.

While Newsweek reported on a corruption crackdown that began near the close of last year in China’s government, investors remain wary of investing in land that could end up being taken from them. That lack of confidence is combined with uncertainty surrounding China’s central bank, which the Economist reported offers practically no insight into policy decisions. Together, these factors prompt many investors in China and other countries with high corruption rates or impenetrable monetary policy to favor investment in America’s established and transparent economy.

A resurgent US economy

The financial crisis that hit near the end of 2007 rocked markets around the world, and the U.S. has recovered faster than other countries. This means that investors who target U.S. investment properties have a higher potential yield than those who purchase homes in other parts of the world. According to data released by real estate firm Cushman and Wakefield, the U.S. has overtaken China to become the world’s top investment market. This is mainly due to the U.S.’s widespread economic strength, which continues to grow.

The employment rate has grown immensely over the past year, and continues to improve. In February 2015, the Bureau of Labor Statistics reported the U.S. gained 295,000 nonfarm jobs. Job growth in certain areas of the country that are driving the economic recovery will fuel demand for housing in specific cities across the nation. This is already evident in cities across the U.S., including Austin, Atlanta and Chicago. Many foreign investors hope to capitalize on these gains.

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